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New Labor Standard: Are You and Your Staffing Partner “Joint Employers”?

Your labor relations just got more interesting. In a decision that has the opposing side up in arms, the National Labor Relations Board (NLRB) last month overturned a 30-year precedent on joint employment as it relates to employers who use a staffing partner.

The ruling boils down to this: Companies and their staffing agencies may be deemed joint employers even when the staffing agency controls hiring, firing, supervising, scheduling, disciplining, evaluating, assigning and training.

How has this changed from previous definitions?

“Under the Reagan administration, the appointees to the [NLRB] came up with a strict definition of what constitutes a joint employer,” Victor Narro, project director at the UCLA Labor Center, explained to the Los Angeles Times. “The definition focused on the degree of control. You had to have direct control over operations, hours, working conditions. Unless you were able to show that, you were not able to hold the parent company liable.”

The new definition seems to blow this stringent requirement of control out of the water. A slim majority of the NLRB asserts the change was necessary to meet the growing practice of procuring employees through staffing and subcontracting arrangements, as well as contingent employment. The Board cited a Bureau of Labor Statistics report projecting “the number of jobs in the employment services industry, which includes employment placement agencies and temporary help services, will increase to almost 4 million by 2022, making it ‘one of the largest and fastest growing [industries] in terms of employment.’”

The NLRB seized an opportunity to make Browning-Ferris Industries of California, Inc. (BFI) and its staffing agency Leadpoint examples for change when a workers’ union that included Leadpoint employees at BFI raised concerns. Ultimately the NLRB ruled that BFI and Leadpoint were joint employers, to both companies’ surprise. Labor & Employment Attorney Audrey E. Mross with Munck Wilson Mandala LLP simplifies the ruling below by calling out the three areas in which NLRB found evidence that BFI had more control over temporary workers than was previously defined.

1.   Hire, Fire and Discipline – BFI retained the right to require Leadpoint to meet or exceed BFI’s hiring standards, required drug tests of the workers and imposed a ban on rehire of certain former BFI employees; these findings trump language in the contract between the parties which said BFI does not participate in day-to-day hiring processes.

2.   Supervision – Even though Leadpoint provided its own onsite supervisors, BFI retained control over the speed of the material streams and productivity standards for sorters; BFI specifies tasks to be completed and exercises “near constant oversight” albeit communicated via Leadpoint’s supervisors.

3.   Wages – BFI prevents Leadpoint from paying its assigned workers more than BFI employees who do similar work; BFI must approve any employee raises.

Based on these factors, BFI and its staffing partner unwittingly became the poster-children for a changing labor landscape.

“NLRB refers to this as a ‘refined’ standard for determining joint employment,” Mross comments. “Most folks I know would call this a complete tear-down.”

What’s the big deal?

It comes down to labor unions and bargaining power. The BFL ruling specifically could give unions greater bargaining power by enabling them to negotiate directly with parent companies, not just the staffing firms who hired and manage their members. The decision may even influence OSHA’s approach to inspections and citations involving temp staff or contract employees, according to the National Law Review. And the new standard is also being applied to franchisees, with McDonald’s Corp. at the center of that controversy. NLRB General Counsel Richard Griffin recently announced that the parent company McDonald’s, not just its franchisees, can be liable for alleged labor law violations under the new joint-employer definition.

The ruling has a long road ahead before it’s accepted by all, however. Many labor attorneys predict it will be challenged, perhaps even in the Supreme Court. It comes as no surprise since two of five NLRB appointees showed extreme dissent when the decision was reached.

As Attorney and BakerHostetler Partner Todd Lebowitz explains, “With charts, diagrams and bullet-pointed outlines, the dissent explained in detail how this new scheme is unworkable in the real world. Who sits at the bargaining table? What is the bargaining unit? What if the company and staffing agency disagree? Which employer participates in NLRB proceedings? What happens when the staffing agency gets new clients? What if those new clients have other staffing agencies or other pre-existing bargaining obligations?”

For now, discuss the issue with your current staffing partner and employment contractors about any arrangements that could fall under the ruling’s jurisdiction. Do you think the new standard will hold? Let us know what you think!

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